The Economic Impact of Wisconsin's Renewable Portfolio Standard

Law mandating use of renewable energy costing Wisconsinites hundreds of millions

March 2013, Vol. 26, No. 4

By David G. Tuerck, Ph.D., Paul Bachman, MSIE, and Michael Head, MSEP

A new study released today by the Wisconsin Policy Research Institute has found that the state law requiring the use of electricity generated from renewable sources such as wind and solar will cost Wisconsinites $788 million between now and 2017.

Commonly referred to as the Renewable Portfolio Standard, the law passed in 1998 and rewritten since then has been forcing utilities in the state to gradually increase the amount of energy from renewable sources. Under current law, 10% of electricity will have to come from renewable sources by 2016, although there is a movement in the Legislature to increase the requirement to 25% by 2025.

Utilities are allowed to pass on all “compliance costs” associated with the RPS to consumers, including both businesses and individuals.

“Legislators might want to pause and consider the economic impact the RPS is already having on homeowners and businesses before moving any further down the road,” said WPRI President George Lightbourn. “Renewables significantly increase electricity costs, and that has a real impact on individual Wisconsinites’ pocketbooks and the overall economy.”

In 2016, according to the analysis done by the Beacon Hill Institute, the current RPS will increase the average household electricity bill by $25 per year, the average commercial business bill by $200 per year and the average industrial business bill by over $15,000 per year. In that year alone, electricity will be 2.4% more costly than it would be without the RPS mandate – a total cost of $208 million.

RPS proponents sometimes argue that the renewable energy industry has created jobs. In 2016 alone however, the study concludes, increased energy costs and the impact to Wisconsin companies’ bottom-lines will lower employment by an estimated 1,780 jobs.

The Beacon Hill Institute study, The Economic Impact of Wisconsin’s Renewable Portfolio Standard, also examined the extent to which the use of renewable energy reduces greenhouse gas emissions, and pointed out an often overlooked fact. Wind and solar are “intermittent technologies” that require reliable backup generation from other traditional sources of electricity.

“The cycling of coal and (to a much lesser extent) gas plants as backup sources cause them to run inefficiently and produce more emissions than if the intermittent technologies were not present,” according to the study.

Executive Summary:

In 1998, Wisconsin lawmakers decided that it would be in the best interest of residents to mandate how electricity is produced. In the 14 years that followed, numerous laws and modifications were passed, resulting in the current Renewable Portfolio Standard (RPS). By the end of 2015, 10 percent of electricity from utilities must derive from renewable sources, with small step-up provisions from 2006 to 2015.

The Beacon Hill Institute has applied its STAMP® (State Tax Analysis Modeling Program) to estimate the economic effects of these RPS mandates. The U.S. Energy Information Administration (EIA), a division of the Department of Energy, provides optimistic estimates of renewable electricity costs and capacity factors. This study bases our estimates on EIA projections and state-specific energy details. Our major findings show that RPS law:

Cost retail electricity customers $210 million from 2008 through to 2010

Will raise the cost of electricity by $208 million for consumers in 2016

Will raise Wisconsin’s electricity prices by 2.4 percent by 2016.

These increased energy prices will hurt Wisconsin’s households and businesses and, in turn, inflict significant harm on the state economy. In 2016, the RPS will:

Lower employment by an expected 1,780 jobs

Reduce real disposable income by $128 million

Decrease investment by $18 million

Increase the average household electricity bill by $25 per year; commercial businesses by an expected $200 per year; and industrial businesses by an expected $15,640 per year.

The Wisconsin Policy Research Institute, established in 1987, is a nonpartisan, not-for-profit think tank working to engage Wisconsinites in discussions and timely action on key public policy issues critical to the state’s future.